Hospitals and health systems have been rapidly employing physicians to help meet the goals of healthcare reform, but the integration has been far from smooth, a new report notes.
A study from the Kentucky Hospital Association, conducted by Lexington, Ky.-based accounting and consulting firm Dean Dorton Allen Ford, found that local hospitals are incurring greater losses in 2014 than they did the prior year.
The results were based on a survey of 20 hospital executives in or near Kentucky.
A total of 58% of respondents reported losses exceeding $100,000 per physician in 2014, up from 41% in 2013. The report did not specifically spell out cost issues associated with employing physicians, but for every physician practice that a hospital or system absorbs, it must upgrade its information technology, pay comprehensive benefit packages and assume the costs of maintaining office space, equipment and staff.
Many healthcare executives argue that even if physician employment strains their balance sheets in the short-term, it's a key step toward creating clinically integrated networks that allow them to participate in risk-based payment models, such as accountable care organizations. More immediately, physician employment increases their referral base at a time when inpatient volume is falling each year.
However, the survey found that 42% of executives aren't tracking the downstream contributions from physician integration. And of those who are, there's no clear consensus on whether there's any downstream benefit at all.
There's every indication, meanwhile, that 2015 will be another robust year for buying physician practices, said Jeff Swearingen, who heads the physician services group at investment bank Edgemont Capital Partners.
The survey did find that losses were greater for hospitalists and specialists than for primary-care physicians. Hospitals are chiefly looking to integrate with office-based specialties, while physician outsourcing firms are rapidly buying up hospital-based specialties, Swearingen said.
The losses seen in the study did not correlate to hospital size. Losses accelerated the longer physicians had been employed, with greater losses seen when physicians were employed longer than seven years.
Hospitals and health systems with the greatest losses also were more likely to have considered or implemented a productivity-based compensation agreement or an alternative arrangement such as a joint operating agreement.
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